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Organizations must follow GAAP or IFRS with respect to financial accounting in order to provide...

Question:

Organizations must follow GAAP or IFRS with respect to financial accounting in order to provide accurate, transparent and consistent financial information.

Managerial accounting has no such standards. Therefore, is managerial accounting information unreliable and not to be trusted?

Managerial Accounting:

Managerial Accounting is the practice of analyzing, interpreting and presenting financial information to the managers of organization in order to aid and facilitate decision-making.

Answer and Explanation:

The main difference between managerial accounting and financial accounting is the purpose for which either compiles financial information. Managerial accounting is aimed at internal users, such as managers and those involved in the decision-making process, while financial accounting is aimed at external users such as creditors and investors. Publicly traded companies must present their financial information in accordance with GAAP or IFRS in order to provide a reliable financial picture for their investors. However, to say that managerial accounting is not reliable due to the lack of the requirement to follow these standards is not true. Managerial accounting is still using the company's financial information, but presenting it in a format that will help understand the company's financial future, make better decisions, and steer the company in the right direction .


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Managerial Accounting Functions

from Business Management: Help & Review

Chapter 9 / Lesson 1
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